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Jerome Powell speaks today at 10:05 am at Jackson Hole. His every word will be dissected for hints of a further rate hike in September.

Hold on to your hats!

👩🏼‍🏭 The labor market remains healthy. Initial jobless claims for the week ending August 19 fell unexpectedly by 10,000 to 230,000. Consensus called for a 1,000 increase. Continuing claims, meanwhile, also fell more than expected and are close to 6-month lows which suggests newly unemployed workers are not facing challenges finding new jobs. Separately, new data from Indeed reveals wage growth is declining faster than inflation is. Whereas wages grew 8% YoY in July 2022 and 5.8% in April of this year, posted wage growth was just 4.7% in July (on a 3-month average basis). That marks the slowest gains for wages since late 2021. The Fed loves that.

🗺️ BRICS is expanding. Of the 23 nations that applied to join its ranks, the emerging market coalition has announced it will extend invitations for membership to 6 new countries: Argentina, Egypt, Ethiopia, Saudia Arabia, and the United Arab Emirates. The additions mean the newly expanded bloc will soon (come January 1, 2024) account for 46% and 37% of the world's population and GDP (in terms of purchasing power), respectively. Regarding the group's identifying acronym, Brazil President Luiz Inácio Lula Da Silva notes it's too catchy to change: "The name will remain BRICS, it's beautiful".

📉 We've said it before and we'll say it again: there’s nothing like price to change sentiment. According to the National Association of Active Investment Managers (NAAIM), active managers have now reduced their exposure to equities for 4 consecutive weeks. The NAAIM Exposure Index now sits at its lowest level since October 2022 (shown above). Turning to retail investors, the American Association of Individual Investors (AAII) Sentiment Survey revealed more bears than bulls for the first time in 3 months, pushing the bull/bear spread down to -3.6 from 5.8. Bullish sentiment among retail now sits in the 33rd percentile.

⏱️ That said, retail still loves its options. More specifically, they love their zero-day-to-expiration (0DTE) options. In fact, according to Cboe Global Markets, retail investors probably account for 30% to 40% of volume linked to 0DTE contracts. Previous estimates had that number at just ~5%. Meanwhile, Wall Street can't seem to decide on how the rise of 0DTE options (which have accounted for 43% of S&P 500 options traded this year as illustrated above) has impacted markets. Whereas Goldman Sachs recently noted that short-dated options had exacerbated the latest sell-off, Bank of America argues that logic was vastly overstated.

📈 Subsidies for global fossil fuels hit a new record in 2022. That's according to the International Monetary Fund (IMF) which revealed a total of $7 trillion in subsidies for coal, oil, and natural gas last year. The figure represents 7.1% of global GDP. Driving the increase were "implicit subsidies" (account for 82%) which reflect governments undercharging for the supply costs of fossil fuels (i.e., when retail prices are lower than supply costs).

📊 Yesterday’s highlights:

DLTR Dollar Tree: $0.91 EPS (vs. $0.87 expected) ✅, $7.32 billion in revenue (vs. $7.18B expected) ✅.

• The budget retailer noted consumer behavior is shifting as shoppers become more price-sensitive.

• Like others, Dollar Tree is facing challenges from inventory shrink and theft.

• The company modestly raised its outlook for profits and revenue for the fiscal year but came up short of Wall Street estimates.

• Rate debate: Fed officials disagree on where rates should go from here.

• 1% down: Zillow has launched 1% down payment mortgages for homebuyers in Arizona.

• Brief rally: A rally in Chinese stocks following a Beijing effort to boost economic growth was short-lived.

• Layoffs: T-Mobile will reduce its workforce by ~7%, or around 5,000 employees.

• Crypto cards: Mastercard and Binance will terminate their crypto card partnership.

• Trump surrenders: Donald Trump surrendered to authorities in Georgia to face criminal charges.

• Beer sale: Heineken sold its Russia business, which includes 7 breweries, for $1.

• OnlyFans payout: OnlyFans has paid its owner $338 million in dividends.

• Online fashion: Shein and Forever 21 have struck a partnership wherein the former will sell the latter's products on its site.

• AI raise: AI startup Hugging Face has raised $235 million at a $4.5 billion valuation from Google, Amazon, Nvidia, and others.

• Audiophiles: Sony will acquire audiophile gear maker Audeze to boost its gamer experience.

• WeBroke: Wall Street funds are discussing potential bankruptcy plans for struggling WeWork.

• Pet market: PAI Partners will acquire pet food maker Alphia for ~$1 billion including debt.

Sources:

• https://www.hiringlab.org/2023/08/24/august-2023-labor-market-update/

• https://www.naaim.org/programs/naaim-exposure-index/

• https://www.bloomberg.com/news/articles/2023-08-24/retail-traders-are-driving-up-to-40-of-zero-day-options-boom?srnd=markets-vp

• https://www.ft.com/content/fa607c72-7810-4ed5-98a3-d27d004c15bd

• https://www.cnbc.com/2023/08/24/dollar-tree-dltr-earnings-q2-2023.html

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